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01 Apr 2023

Why Are Car Prices So High

Car Prices So High Purchasing a new set of wheels applied to be fairly stressful. Now it can become a nightmare.

New cars are incredibly scarce. Used ones are absurdly expensive. Competition among buyers is fierce. And things seem to get inferior and worse.

But What Exactly Is Going On Here?

In short, the root of the chaos is a shortage of computer chips, forcing car companies around the world to build far fewer vehicles. Automakers from General Motors to Toyota have canceled millions of units of production simply because they don’t have the necessary chips. A modern vehicle may need thousands of these.

Manufacturers cut their chip orders early in the pandemic, but auto demand fell much faster than expected, leaving them scrambling for semiconductors. The global appetite for connected microwaves and other smart devices has eaten up much of the supply, while the Covid-19 outbreak and other unrelated disasters have further derailed the chip industry.

Car Prices Skyrocket

The average cost of a new car has risen from just $39,000 in 2020 to more than $48,000 this year, corresponding to historical data from Kelley Blue Book.

The price of new cars and trucks has been fairly stable in recent years, but is up 11.4% in 2022, according to the Bureau of Labor Statistics. Used vehicle prices rose 7.1 percent.

has set an unfortunate record: For the first time, consumers paid an average of more than $48,000 for a new car.

Parts shortages are the main culprit for rising tag prices, particularly microchip shortages. On Wednesday, the Senate approved a package to increase funding for domestic chip production. The absence of chips is the main cause of the shortage of new vehicles and trucks, said Charlie Chesbrough, senior economist and senior manager of business information at Cox Automotive.

“When there were new cars, dealers were charging thousands of dollars over MSRP, and people were paying simply because there weren’t enough cars on the market,” said Pamela Foohey, a law professor at Yeshiva University’s Cardozo School of Law. the published articles on car loans.

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